Trump, Guaranteed-Issue Coverage, and the Rest of the ACA

Health Background
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There's no doubt that Donald Trump's presidency—along with a continued Republican majority in Congress—will have a significant impact on the Affordable Care Act (Obamacare) and the way health insurance works in the U.S.

But after campaigning on the promise to repeal Obamacare "on day one," Trump backed off that position in the days following the election, noting that there were some parts of the law that he'd like to keep, including coverage being guaranteed-issue regardless of pre-existing conditions, and the provision that allows young adults to remain on a parent's health plan until age 26.

Indeed, those aspects of the law are widely popular and have strong bipartisan support, as do the rules that prevent health insurers from imposing annual or lifetime caps on coverage.

But there are other provisions of the ACA that are much less popular, including the requirement that all Americans—unless eligible for an exemption—maintain health insurance coverage or face a tax penalty.

These less-popular provisions are the target of "repeal and replace" efforts that Congressional Republicans started on day one of the 2017 legislative session. Before President Trump took office, Congress had already passed a budget resolution directing legislative committees to draft legislation to repeal spending-related parts of the ACA via reconciliation. And on Trump's first day in office, he signed an executive order directing federal agencies to be lenient in their enforcement of the ACA's taxes and penalties.

The legislative process of repealing and replacing the ACA could drag on for much of 2017, but if and when it passes, the general consensus is that the implementation of any changes would be delayed until at least 2018, and more likely 2019.


If Congress passes a reconciliation bill (which only requires a simple majority and is filibuster-proof), they could strip out the spending-related provisions in the ACA. That would include things like the premium subsidies, cost-sharing subsidies, and Medicaid expansion, along with the penalties associated with the employer mandate and the individual mandate.

But a reconciliation bill would not be able to repeal aspects of the ACA that don't relate to spending—things like the provision that all coverage be guaranteed-issue regardless of medical history, and the requirement that all individual and small group plans cover the essential health benefits.

Adjusting those requirements could be done with regular legislation, and Republicans have put forth several proposals over the last few years, including blueprints for their vision of healthcare as well as numerous pieces of legislation, including some replacement bills that were introduced in the early weeks of the 2017 legislative session.

And indeed, there are certainly multiple ways to go about reforming the health insurance and healthcare systems in the U.S. There is no doubt that the ACA itself was in need of adjustments over the last few years, but it was such a political hot potato that lawmakers couldn't figure out a way to develop compromises that could win enough votes to pass.

Realistic Replacements

When it comes down to the nuts and bolts of replacing Obamacare, there are some challenges that will arise if the focus is on keeping popular aspects of the law while eliminating the less popular provisions.

Under the Trump Administration and a Republican majority in Congress, it's almost guaranteed that our current system of private health insurance will remain in place, rather than a transition to single payer. With that in mind, there has to be a focus on ensuring that insurers have an incentive to continue to offer coverage in the individual health insurance market.

The majority of private health insurance is employer-sponsored coverage, and that will likely continue to be the case for the foreseeable future: The vast majority of large companies offered insurance to their workers long before the ACA required them to do so, and most will continue to do so even if the ACA's employer mandate is repealed; health insurance is part of a competitive benefits package that employers use to attract and retain employees.

Although the ACA did change some aspects of employer-sponsored insurance, the majority of its reforms were aimed at the individual health insurance market. There are roughly 22 million people in the U.S. who have individual health insurance (meaning coverage that they purchase themselves, rather than obtaining from an employer or from the government). As of 2016, roughly half of them had coverage in the exchanges that were established under the ACA. The other half had purchased their coverage directly from health insurance carriers off-exchange, or still had coverage under grandmothered or grandfathered plans.

It's this market—individual health insurance—that has undergone the most drastic changes under the ACA. And there are four main aspects of the law that are designed to work together to ensure that individual health insurance coverage is accessible to everyone who needs it:

  • Premium subsidies to make coverage affordable for people who otherwise simply would not be able to pay the premiums. Premium subsidies under the ACA are available to enrollees with incomes up to 400 percent of the poverty level, which is $97,200 for a family of four in 2017.
  • Guaranteed-issue coverage, which means medical underwriting is no longer used to determine whether people can obtain coverage in the individual market, or to set their premiums. Prior to 2013, all but five states allowed health insurance companies to conduct extensive medical underwriting to determine whether an applicant could get coverage, and what premium would be charged. Higher premiums—or denial of coverage altogether—were routinely assessed for everything from pregnancy to a history of cancer to being overweight to having asthma.
  • Limited enrollment periods. The ACA established annual open enrollment periods (applicable in the exchanges as well as outside the exchanges), which HHS was tasked with scheduling. The first open enrollment period (for 2014 coverage) lasted six months. Since then, each annual open enrollment period has been three months long, and that's scheduled to still be the case for 2018 coverage.
    • But starting with 2019 coverage, open enrollment will be shorter, running from November 1 to December 15 each year (HHS is considering a proposal to shorten the 2018 open enrollment period, making the switch to shorter enrollment periods a year earlier than previously scheduled). The ACA also allows for special enrollment periods that give people access to individual market coverage outside of open enrollment, if they have a qualifying life event that triggers a special enrollment period.
    • Examples are getting married, having a baby, or losing access to an existing health insurance plan. But without a qualifying event, health insurance can't be purchased outside of open enrollment, either on the exchange or directly from a health insurance carrier. The point of the limited enrollment windows is to prevent people from postponing enrollment until they're in need of care.
  • The individual mandate that requires everyone to have health insurance or pay a tax penalty. The average penalty assessed for people who were uninsured in 2014 was only about $210, but it increased to $470 for people who were uninsured in 2015, and it will be even higher when 2016 penalties are assessed on tax returns filed in 2017.

Guaranteed-issue coverage has widespread popularity. Premium subsidies have some degree of popularity, although several of the proposals to replace the ACA rely on more universal tax credits that aren't tied to income, but that also might not be indexed to the actual cost of health insurance. Such tax credits could prove to be inadequate as time goes by if the cost of healthcare continues to rise faster than overall inflation.

But the individual mandate is generally pretty unpopular, and Republican health care reform proposals frequently call for eliminating it (despite the fact that the concept of an individual mandate was popular with conservative think tanks and lawmakers back in the 80s and 90s).

Can You Have Guaranteed-Issue Coverage Without a Mandate?

If you keep the guaranteed-issue provision of the ACA but eliminate the individual mandate, you run up against a significant problem: People could go uninsured when they're healthy, and then sign up for insurance when they need treatment. The resulting skyrocketing insurance premiums are pretty easy to predict in that situation.

New York implemented guaranteed-issue coverage two decades before the ACA brought the concept nationwide, but they didn't have an individual mandate. The result was premiums that were far higher than the rest of the country (even in 2017, individual market health insurance premiums are more than 50 percent lower in New York than they were in 2013).

Indeed, that's been part of the problem that the ACA has had over the last couple years: individual market enrollees have been older and sicker than anticipated (because not enough young, healthy people have enrolled to balance out the risk pool), and premiums have not been adequate to cover the costs that insurers have been incurring in the individual market. There are a variety of reasons for this, including the fact that the ACA's individual mandate penalty is not particularly enforceable, and the fact that special enrollment period eligibility has been somewhat lax; there's no single reason for the lower-than-expected number of healthy enrollees.

But financial losses in the individual market are why a significant number of insurers opted to exit the exchanges or the entire individual market for 2017. It just wasn't proving to be a profitable market segment for them, and it's a small market segment anyway, so insurers who drop out of the individual market can instead focus on the larger market segments, including employer-sponsored insurance, Medicare Advantage, and Medicaid managed care.

In short, insurers are not going to offer coverage in the individual market unless they can be reasonably assured that the market will remain sustainable, and that enough healthy people will enroll to offset the cost of covering enrollees who need medical care.

There are various ways of going about this, but they all involve some sort of means of making it difficult or impossible for people to go without coverage when they're healthy. It can be an individual mandate, or it can be uniformly higher premiums for people who don't enroll when initially eligible (this is how Medicare Part B and Part D work). Or it can be higher premiums based on medical underwriting for people who don't maintain continuous coverage (this is part of the proposal put forth by House Republicans in 2016).

But one way or another, there has to be an incentive to get people to enroll, as long as we're relying on a system that uses private health insurance and voluntary enrollments. Prior to 2013, that incentive was the fact that coverage was not guaranteed issue in most states, so people had to enroll while they were healthy—and stay enrolled—in order to avoid being uninsurable if and when they developed a pre-existing condition.

We could go back to that system, but a return to pre-existing conditions and nearly universal medical underwriting is not going to be politically popular. More than likely, guaranteed-issue coverage is here to stay, in some form. And that means that some sort of penalty for not enrolling is also here to stay, in some form. It could be higher premiums for people who enroll later or some type of medical underwriting for people who don't maintain continuous coverage. But there's no way to keep the guaranteed-issue provision of the ACA without ensuring that enough healthy people enroll in coverage to balance out the risk pool.

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